Republican members of the US Congress have consistently blocked
legislation that would clamp down on the type of aggressive tax planning
that put Ireland in the spotlight over the past number of months,
according to Trinity economics professor, Frank Barry.
Moreover, the US economy, as well as financial centres such as London,
have come to rely on the huge flows of capital that are routed through
tax havens, he added.
Mr Barry, who is one of Ireland’s
leading experts on foreign direct investment, made his comments during a
seminar about aggressive tax planning as part of Trinity’s Development
Ireland was on the receiving end of unfavourable
international media coverage following US Senate Hearings in June, which
heard evidence that Apple had avoided paying billions in tax by routing
huge chunks of its profits through Irish registered but non-resident
Minister for Finance Michael Noonan introduced
legislation in the budget which prohibits companies from registering in
Ireland if they are not tax resident in another country.
The chairman of the Senate Committee, senator Carl Levin and senator John McCain both accused Ireland of being a tax haven.
Barry said that Ireland does not meet the criteria of a tax haven
according to the OECD definition of the term. This country has a very
transparent and open tax framework, he added.
included in a list of tax havens by the US government in 2009 based on
an erroneous interpretation of the ‘grandfathering rule’ that existed
when the Government changed tax policy in the late 1970s to comply with
EU regulations, explained Mr Barry. This has since been cleared up.
existence of tax havens such as Bermuda and the Cayman Islands are an
integral part of aggressive tax planning by US multinationals. This was
enabled through a change to US tax policy in 1997 that allowed US MNCs
to book royalty and intellectual property payments outside the US in
what was ‘check the box’ legislation.
Mr Barry pointed out that
both senators McCain and Levin voted for this legislation. However, only
the repeal of this legislation would eliminate the type of aggressive
tax planning that came in for criticism during Senate hearings.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.